Order Date – 16 February 2023

Parties: M/s Cairn India Limited, (now merged with Vedanta Limited) Vs Assistant Commissioner, Central Excise Division

Facts –

• The Appellant, M/s Cairn India Limited, (now merged with Vedanta Limited), produce oil by drilling. In the process of manufacture of oil, plastic barrels in which the input chemicals are procured arise as scrap. The residuary portion of tubes or pipes upon cutting and fitting of operation etc., also arises as waste/scrap. These scraps and wastes are sold to third parties.
• Three show cause notices were issued alleging that the appellant is generating this scrap in the process of manufacture of excisable goods namely oil and, therefore, it is chargeable to excise duty. 

Issue –

• Whether the appellant is liable to pay excise duty on waste and scraps emerged during the manufacturing process?

Order –

• The Tribunal held that when pipes need repair or replacing and waste is generated in the process, it is a waste generated during the repair or maintenance of capital goods and not during the process of production of oil or any process incidental or ancillary to it. Hence no excise duty can be charged on the scrap of pipes produced in this manner.
• The empty barrels are only packing material in which the inputs are received and these barrels are not generated during the process of manufacture. Therefore, no excise duty can be charged even on that scrap.
• Hence the appeal allowed.